The Continuing Evolution of “Starbucks with Chinese Characteristics”

Last year was a big year for Starbucks in China. The company continued to open cafes at a rapid rate, began offering breakfast to Chinese consumers for the first time, was accused of “cultural invasion” for the second time in five years, and took a huge step toward establishing Yunnan Province as a major producer of coffee beans. All of these developments, and the rapid evolution of the company’s China strategy in general, led us to launch a special series – “Starbucks in China” – last December. In contrast, 2013 started off quietly on the Starbucks China front. That is, until last week, when the publication of a China Daily article and the company’s annual shareholder’s meeting shed fresh light on what new plans the popular coffee purveyor is brewing in China.

The fact that Starbucks is considering selling a Yunnan varietal of coffee in Chinese grocery stores is proof positive of two continuing trends in the company’s development – 1) its ever increasing reach into the Chinese market, and 2) its new focus on the development of Yunnan as a major source of its coffee beans. The opening of a Community Store, for its part, would comprise a new chapter in the company’s efforts to balance its global image with local needs, creating a brand of “Starbucks with Chinese Characteristics.”

Since Starbucks announced plans to triple its number of stores in China last spring, its offering of products and services has continued to expand and diversify. More Chinese-style foods and beverages are being introduced, and breakfast has been unveiled for the company’s growing legion of Chinese customers. Selling their products in grocery stores would be a new step for the company’s China operations but something it has long offered elsewhere. Ground coffee and bottled drinks from Starbucks can already be purchased at many grocery stores around the world, including in the U.S. and U.K. The devil here will be in the details, including the choice of grocery stores where the company plans to sell its coffee. Instant coffee continues to dominate the retail market in China, and home coffee machines are far from ubiquitous. Thus, while the news that Starbucks is considering selling ground coffee in Chinese grocery stores is enough to excite widespread interest, it seems likely that such a move would target upscale urban grocery stores and not ordinary markets.

Culver’s comments on Yunnan coffee, meanwhile, are an important reminder of Starbucks’ plans for helping transform the province into a major coffee bean producer. The relationship between Starbucks and Yunnan stretches back to 2009, when a collaborative program between the company’s executives and local officials introduced four coffee bean varietals to the region. In 2012, the relationship took a major step forward when the coffee giant opened its first Asia-based Farmers Support Center in Pu’er. The Center offers direct aid to local farmers who are working to grow high quality coffee beans. Given this history, Starbucks’ commitment to developing a major Yunnan variety of coffee seems to be a natural extension of a process that was already in motion.

*Editors Note: If you enjoy this article, you can find more like it in the Starbucks Series Archive, or we can provide you with a number of custom research options. Learn More

The opening of a Community Store, like the prospect of Starbucks ground coffee for sale in Chinese grocery stores, remains more an idea than a detailed plan. If actualized, however, it would align with the company’s history of balancing its global image with local needs in China. In recent years, Starbucks has worked hard to incorporate itself into Chinese society not just through the inclusion of Chinese flavors on its menu and Chinese décor in its stores, but also through personnel policies and marketing campaigns that feature distinctly local characteristics, including family forums and a concerted push into the unique realm of Chinese social media. The opening of a local Community Store would be the latest step in the company’s continued evolution from Starbucks to “Starbucks with Chinese Characteristics.”

Starbucks seems to be a little late on China. Aren’t there already a lot of bakery and coffee shops already geared toward Chinese culture. How will this play out?

Stay in the Loop

Don't miss another article.

Confidential. No Spam. Just news.

About Robert

Robert O’Brien is a research analyst at contextChina, where his writing focuses on the evolution of China’s technology sector. Prior to joining contextChina, Robert worked at the Brookings Institution’s John L. Thornton China Center in Washington, DC and served as a Fulbright Scholar at Tsinghua University in Beijing. Robert’s writing has been featured by The Seattle Times, GeekWire, TechRice, and China Security. Robert has degrees in International Relations and Chinese Language and Literature from the University of Oxford and George Washington University. He is currently completing his Oxford PhD dissertation. Robert lives in Seattle with his wife Carey. He can be reached at robert@contextchina.com.